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Expansion delay foils SA’s 2004 coal export plan

The delay in the Richards Bay Coal Terminal’s (RBCT) phase
five expansion from 72-million t/y to 82-million t/y, also known as
the South Dunes Coal Terminal (SDCT) project, has resulted in South
African coal exports languishing.

It has also created delays in the launching of some coal
brownfields projects, as it is tied up closely with
producers’ access to export infrastructure.

Minerals Bureau chief mineral economist Xavier Prevost believes the
expansion is long overdue and the longer the delay the more
crippling its effect on the South African export market.

“Even though it seems there can be a solution to the cause of
the delay, the ten- million tons that could have been exported
through SDCT will not reach export markets before the end of
2005,” says Prevost.

This means South Africa’s plans to export 84-million tons a
year by next year cannot be realised, he states.

The RBCT expansion plan, which was announced in 2000, has seen a
number of delays due to disagreements between the different parties
involved, including transport utility Transnet, the National Ports
Authority (NPA), and RBCT.

It is understood that the delay centres around the land lease
agreement and the memorandum of understanding that had been signed
by stake- holders in the project.

The disagreement stems from common-user capacity and throughputs,
with Transnet requesting four-million tons of capacity, as opposed
to the one-million tons that was offered by the RBCT at the onset
of the project.

Another hurdle is believed to centre around RBCT’s intention
to continue with existing land lease rates and agreements with NPA,
while the ports authority and Transnet want to renegotiate.

Prevost is optimistic that there may be an under-standing between
the parties in the near future, since it seems most of the major
hurdles have been overcome by the new RBCT proposal, meaning the
expansion may go ahead.

However, the industry will have to wait for another two years
before construction is completed, Prevost notes.

With black economic empowerment (BEE) companies and junior
entrepreneurs still looking to establish themselves in the export
market, the delay could not have come at a worse time.

“This is probably the worst thing that ever happened to these
companies, because the extra ten-million tons would have been
crucial for their growth,” Prevost states.

In spite of the one- million-ton capacity that has been set aside
by the RBCT on its existing structure to accommodate BEE companies,
Prevost maintains that the access of export infrastructure for
independent or smaller producers remains one of the most important
challenges facing the coal industry in South Africa.

The RBCT consortium has agreed that, during the next three years,
the exports of empowerment companies through the terminal will
increase.

In effect, this means those companies that have been exporting
through the terminal before will have to decrease their exports
slightly.

“The problem is that we will not be able to increase
RBCT’s capacity to make it accommodate more, but we can only
improve its use in the meantime, as we await the much-needed
expansion,” Prevost reiterates.

Future access to potential economically viable coal reserves is
also still a major challenge to the industry, with empowerment
entrepreneurs still actively seeking exploitable coal reserves and
infrastructure to make their export bids viable. Prevost says
existing high-quality reserves are not accessible to empowerment
companies because they are in the hands of big companies.

He notes, however, that negotiations with these companies to
release unused reserves to empowerment companies have been
successful thus far, and some of the main producers have decided to
divest themselves of their nonessential reserve blocks.

Lack of information on available reserves also adds to the
problem.

The Coaltech 2020 research programme has released a list of some
available reserves in the Witbank area, but Prevost believes the
list does not contain sufficient quality reserve tonnage that can
be used.

He stresses the importance of cooperation between government and
the industry overcoming the problems facing the coal
industry.

“If the government and the industry work together,
coal’s place as South Africa’s cheapest and main energy
source will remain unchallenged for a long time,” Prevost
says.